This week Intel brought out a powerful new Atom processor that, according to them, could fit into an iPhone form, is vastly more powerful with similar battery life, and is priced competitively.
From a technology standpoint it is an impressive piece of work and had anyone argued that an x86 processor could even come close to being able to work this efficiently they likely would have been laughed out of the room a short decade ago.
However Intel faces a similar problem faced by companies that have tried to move in on Windows, the iPod, and even x86 and that is that people don’t like to move and once they pick a technology they are likely to stay with it unless they become extremely unhappy.
It is somewhat ironic, if we use the iPad as an example of a product that could displace x86, that the right way of displacing an entrenched technology is being demonstrated by ARM and not Intel. Let’s explore this.
Beating an Entrenched Product
Back in the early 90s I did a study on a product called Crosstalk for Windows which was dominant at the time to determine whether it was worth developing a competitor. This product was used with modems and provided the best native interface with a variety of message boards and we determined that it was so dominant and so easy to use that even if we came up with a better product we likely couldn’t displace Crosstalk. The Internet arrived, Crosstalk became obsolete, and this invulnerable product was gone as a result of a market move and not a competing offering.
A number of large companies tried to compete with IBM on mainframes but IBM didn’t lose its dominance until PCs and UNIX displaced them with a completely different concept in the way computing was done. Running at IBM head on did no good, flanking the company in an area that they didn’t dominate worked. It is ironic that Sun which benefited from this lesson with IBM then promptly forgot it with Microsoft died as an independent company as a result of not really learning this lesson.
The iPad Example
At the Intel Atom event there were several analysts using iPads instead of notebook computers. This showcases the application of this competitive model. This use showcased that while it would be virtually impossible for ARM to displace Intel in laptops it could displace Intel if the market moved away from laptops to something that used ARM, like the iPad, instead. If we think of Smartphones as the ultimate portable computer ARM has been moving into Intel’s turf for some time albeit on a different class of product.
Clearly Intel saw the threat eventually and Atom was developed to counter it but by the time it took for Intel to redesign their technology, on top of the time it took to see the threat, ARM had become fully dominant in a maturing market and Intel was nearly locked out. The big problem now is much like x86 is connected hard to PCs, ARM is connected hard to Smartphones.
However the Tablet market is still young and could go either way. Unfortunately HP, largest PC vendor, just bought ARM based Palm to address both Smartphone and Tablet markets suggesting that, right now, this new tablet market is starting to go towards ARM and aggressively away from Intel suggesting they may have lost this fight before ever really entering this new segment.
ARM Shows the Way
This tablet move puts Intel’s PC market at risk as analysts tend to be trend setters and the three using the iPads were two of the top Gartner analysts and Tim Bajarin who may be the leading consumer analyst. I found myself envying the battery life (my notebook battery was dead), weight, and sexy look of their iPads as I took notes with a pen and paper. The iPad experience is far from perfect but it sure beats a dead notebook.
But the point here is that ARM is being more successful by not being better than Intel on Notebooks but by being better on something someone might use instead of a notebook. In other words, by flanking Intel ARM is moving against Intel better with less funding then Intel is doing moving against ARM head on.
Beating ARM or Intel or Apple or Microsoft or any Entrenched Vendor
The lesson here is that if you want to move a market from a dominant product to another you have to ride a wave. Apple did the best job of any vendor against Microsoft during the Vista years and even so they didn’t really do that much damage to the firm for the money spent. With the iPhone, and potentially with the iPad, they will do far more with a vastly lower investment and have a higher probability to become dominant themselves.
For Intel this means they will probably fail with Smartphones but could succeed with something that better showcases their technology that people use instead of a Smartphone. I can think of a couple of product directions people might like better. For instance a tablet is better for the web but unusable as a phone and Smartphones tend to be great at everything but being a phone.
A more modular approach to a product that had the screen of a tablet but a bundled small phone and shared the data service could, if designed and packaged right, be a better solution than an iPad + iPhone neither of which can currently be tethered to the other and are somewhat redundant. The iPhone is far from perfect and Apple is evidently rather thin skinned about this as Ellen DeGeneres found out this week.
Wrapping Up and Tsun Tsu
I love going back centuries to showcase that this type of strategy is not new. Tsun Tsu’s the Art of War is truly worth reviewing for anyone looking to pick winners and losers in any conflict. I generally focus on chapter 8 of the book and the use of spies, but here the sections on maneuvering and weak and strong points, is pertinent.
The basic lesson applied here is that if you are fighting a dominant technology or vendor (or powerful army), don’t fight on their turf, make them fight on yours. Flank them where they are weak, don’t attack them at their strong points. Google beat Microsoft by forcing Microsoft to fight on Google’s turf, Apple beat Microsoft (iPod/iPhone) by forcing Microsoft to fight on Apple’s, and ARM is beating Intel by forcing Intel to fight on Arm’s turf.
So to answer the question in the title, can Intel Beat Arm? Certainly, but not the way they are going about it, the path they are on typically fails. The path that ARM is on against Intel has historically been more successful I’ll bet there are more ARM based tablets displacing Notebooks by the end of the year than Intel based Smartphones displacing ARM based Smartphones as a result.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies. The opinions expressed in this commentary are solely those of the writer.
